Module 2- Retail Mkt Strategy

8/4/2019 Module 2- Retail Mkt Strategy

http://slidepdf.com/reader/full/module-2-retail-mkt-strategy 1/31

Module 2

RETAIL MARKET STRATEGY



Retail Market

• We define a retail market not as a

specific place where buyers andsellers meet

• it is a group of consumers with

similar needs (a market segment)

and a group of retailers using asimilar retail format to satisfy those

consumer needs



Retail Market Strategy

•

A retail strategy is a statementidentifying

• (1) the retailer’s target market

• (2) the format the retailer plans to use

to satisfy the target market’s needs

• (3) the bases upon which the retailer

plans to build a sustainable competitive

advantage



Target Market

1

•

The target market is themarket segment (s)

toward which the retailer

plans to focus its

resources and retail mix



• A retail format is the retailer’s

mix ( nature of merchandise and

services offered, pricing policy,

advertising and promotion

program, approach to store

design and visual merchandising,and typical location)



2

• A sustainable competitive

advantage is an advantage

over competition that can

be maintained over a long

time

Sustainable Competitive Advantage



Building a Sustainable Competitive

Advantage

• The final element in a retail

strategy is the retailer’s

approach to building a

sustainable competitive

advantage



• Seven important opportunities for retailers to develop sustainable

competitive advantages are (1) customer loyalty, (2) location, (3)human resource management, (4) distribution and information

systems, (5) unique merchandise, (6) vendor relations, and (7)

customer service

Building a Sustainable Competitive

Advantage



• Customer Loyalty means that customers are committed to shopping at the retailer’s

locations

• Loyalty is more than simply liking one retailer over another

• Loyalty means that customers will be reluctant to patronize competitive retailers

• For example, loyal customers will continue to shop at Restoration Hardware even if Pottery

Barn opens a store nearby and provides a slightly superior assortment or slightly lower price

Customer Loyalty



• Some ways that retailers build loyalty are by (1) developing clear and

precise positioning strategies and (2) creating an emotional

attachment with customers through loyalty programs

Customer Loyalty



• Positioning: A retailer build customer loyalty by developing a clear, distinctive

image of its retail offering and consistently reinforcing that image through itsmerchandise and service

• Positioning is the design and implementation of a retail mix to create an image of

the retailer in the customer’s mind relative to its competitors

Customer Loyalty



• Loyalty Programs: are part

of an overall customerrelationship management

(CRM) program

• These programs are

prevalent in retailing, from

airlines and department

stores to the corner pizza

shop

• Customer loyalty programs

work hand- in- hand with

CRM

Customer Loyalty



Location

•The classic response to the question “What

are the three most important things inretailing?” is “location, location, and location”

•Location is the critical factor in consumer

selection of a store

•It is also not a competitive advantage that is

not easily duplicated

•For instance, once Walgreens has put a store

at the best- location of an intersection, CVS is

relegated to the second best- location

•Finding great locations is particularly

challenging in older urban locations, where

space is finite and tenant turnover is relatively

slow



Human Resource Management

• Retailing is a labor- intensive business

• Employees play a major role in providing

services for customers and building

customer loyalty

• Knowledgeable and skilled employees

committed to the retailer’s objectives

are critical assets that support the

success of companies such as Southwest

Airlines, Whole Foods, Home Depot and

Men’s Wearhouse

• Recruiting and retaining great

employees does not come easy



• All retailers strive for

efficient operations• They want to get their

customers the

merchandise they want,

when they want it, in thequantities that are

required, at a lower

delivered cost than their

competitors

Distribution and Information Systems



• By doing so, they will satisfy their customers’

needs and , at the same time, either providethem with lower- priced merchandise than

their competition or decide to use the

additional margin to attract customers from

competitors by offering even better service,

merchandise assortments, and visual

presentations

• Retailers can achieve these efficiencies by

developing sophisticated distribution and

information systems

Distribution and Information Systems



• It is difficult for retailers to develop a competitive advantage through merchandise because

competitors can purchase and sell the same popular national brands

• But many retailers realize a sustainable competitive advantage by developing private- label

brands (also called store brands), which are products developed and marketed by a retailer

and available only from that retailer

Unique Merchandise



• By developing strong relations with vendors,

retailers may gain exclusive rights (1) to sell

merchandise in a region, (2) to obtain special

terms of purchase that are not available to

competitors who lack such relations, or (3) to

receive popular merchandise in short supply

• Relationships with vendors, like relationships

with customers, are developed over a longtime may not be easily offset by a competitor

• For example, Ahold, the Holland- based food

retailer, works very closely with Swiss food

giant Nestle to bring its customers products

tailored to meet the tastes of customers inlocal markets

Vendor Relations



• Retailers also build a sustainable competitive advantage by offering excellent customer

service

• But offering good service consistently is difficult

• Customer service is provided by retail employees – and humans are less consistent than

machines

Customer Service



• To build a sustainable competitive

advantage, retailers typically don’t rely on a

single approach such as low cost or

excellent service

• They need multiple approaches to build as

high a wall around their position as possible

• For example, McDonald’s success is based

on providing customers with a good value

that meets their expectations, having good

customer service, maintaining good vendor

relations and having great locations

• By doing all of these things right,

McDonald’s has developed a huge cadre of loyal customers

Multiple Sources of Advantage



• There are four types of growth opportunities that retailers may pursue:

1. Market Penetration

2. Market Expansion

3. Retail Format Development

4. Diversification

Growth Strategies




• A market penetration opportunity

involves directing efforts toward

existing customers by using the

present retailing format

• The retailer can achieve this growth

strategy either by attracting

customers in its current target

market who don’t shop at its outletsor by devising strategies that

devising strategies that induce

current customers to visit a store

more often or to buy more

merchandise on each visit

• Approaches for increasing market

penetration include attracting new

customers by opening more stores

in the target market and training

salespeople to cross- sell



• Cross- selling means that sales associates in

one department attempt to sell

complementary merchandise from other

departments to their customers

• For example, a sales associate who has justsold a dress to a customer will take the

customer to the accessories department to

sell her a handbag or scarf that will go with

the dress

•More cross- selling increases sales fromexisting customers




7

• A market expansion

opportunity employs the

existing retail format in new

market segments

• For example, when the French

hypermarket chain Carrefour

expanded into other Europeanand South American countries,

it was also employing a market

expansion growth strategy

because it was entering a new

geographic market segment

with essentially the same retail

format

2. Market Expansion



• A retail format development opportunity involves offering a new retail format- a

format with a different retail mix- to the same target market

• For example, Barnes & Noble, a specialty book store- based retailer, exploited a

format development opportunity when it began selling books to its present target

market over the internet

3. Retail Format Development



• A diversification opportunity is when a retailer introduces a new retail format

directed toward a market segment that’s not currently served

• Diversification opportunities are either related or unrelated

4. Diversification



• In a related diversification opportunity, the present target market or retail format

shares something in common with the new opportunity

• This commonality might entail purchasing from the same vendors, using the same

distribution or management information system, or advertising in the same

newspapers to similar target markets

• In contrast, an unrelated diversification lacks any commonality between the

present business and the new business

Related V/s Unrelated Diversification



• Vertical integration is diversification by retailers into wholesaling or

manufacturing

• When a retailer integrates by purchasing or otherwise partnering with

distribution or manufacturing concerns, it is engaging in backward integration

because the requisite skills are different from those usually associated with

retailing

• Additionally, retailers and manufacturers have different customers- the

immediate customers for a manufacturer’s merchandise are retailers, whereas a

retailer’s customers are consumers

• Thus, a manufacturer’s marketing activities are different from those of a retailer

• Note that some manufacturers and designers like Nike, Prada, and Ralph Lauren forward integrate into retailing

Vertical Integration



• Four characteristics of retailers that have successfully exploited

international growth opportunities are (1) globally sustainable

competitive advantage, (2) adaptability, (3) global culture, and (4)

deep pockets- Refer Page 164 of Text for explanation of the points

Keys to Success



• Four approaches that retailers take when entering non- domestic

markets are direct investment, joint venture, strategic alliance and

franchising- Refer Page 166 in Text

Entry strategies



b. Complementary Services: Another way to inventory demand is by

adopting a management system for ‘queuing’, i.e. the time that

customers spend in waiting can be made productive and enjoyable. For

example, restaurants have discovered the benefits of complementary

services by adding a bar, or diverting the waiting customers into the

lounge during busy periods can be profitable to the restaurant as well

as soothing to anxious customers, or selling pop corn and soft drinks inthe movie theaters. This in turn is an important revenue service.

The Strategic Retail Planning Process

Documents

Module 2- Retail Mkt Strategy